Economic Update: Capitalism's Shrinking Popularity

[S11 E27] New

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On this week's show, Prof. Wolff discusses French voters abstaining (66%), and rejecting party establishments in the face of social crisis; Seattle City Council helps tenants with law changes as conservatives seek to recall progressive Council leader Sawan; growing US economic inequality cuts mass consumption and thus hurts US economy; June 2021 polls show capitalism losing, socialism gaining among US adults including Republicans; Washington Post columnist seeks to ban billionaires as bad for society.

Transcript has been edited for clarity.

Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives: jobs, debts, incomes — our own and our children’s. I'm your host, Richard Wolff.

I want to begin with a comment on the results of the French elections on Sunday, June 27th. I bring them to you because of the lessons they have for the United States and for other countries, because the differences there are not that big. The French elections of June 27th were remarkable. First of all, they were remarkable because the two leading public contenders for political attention in France for months now have been the extreme right-wing Marine Le Pen, who associates herself with Donald Trump and says she's just like him, versus the President of France, Emmanuel Macron, who you might describe as the center, or the center-right of French politics.

Over the last while, in the week before these final elections — because in French politics there were two elections, one Sunday after the other — these two leaders were both rejected by the population. Mr. Macron, his party came in fifth out of five in the first round and did very poorly in the second round as well. Ditto for Marine Le Pen. This was a rejection by the French political-interested folks, let's call it, of these two politicians, of their respective parties, and of what they propose — which is a right-wing version of something in America you might call on the one hand Donald Trump and on the other hand Mitch McConnell and Nancy Pelosi, depending a little bit on your shading of these things.

But perhaps the most important lesson is not only that these right-wingers and centrists were defeated soundly in these elections but the fact — and this will come as a surprise because in France people participate and care about politics rather more than in many other countries — here was the outcome in terms of who voted: For every French eligible voter who cast a ballot, two eligible voters did not. That's right — over 65 percent of the French electorate stayed home.

Now, what's going on here is important. This is not that people aren't interested in politics, especially not in France. The involvement there — as, for example, we've documented by talking about the Yellow Vest Movement and so on — is greater than in most countries, and has been for at least two centuries. What's going on is different. It's the feeling of the vast majority of the French. And by the way, the number of abstentions (that's what they're called in France) is even greater when you look at young people — people under the age of 35. What's going on here is a massive statement by the French electorate that the problems of the French economy and of French society are way graver, way beyond what is coming out of the mouths of conventional politicians.

It's not that they think less of the conventional politicians. Those who voted went and voted for the two major alternatives: center-right, called Republicans in France, and center-left, called the Socialist Party of France. They got their usual stalwarts out, and they voted for them. But everybody else, the vast majority of the French electorate, sees a disconnect between the level of the problems of what's happening in France and this conventional old politics which seems utterly out of context, out of connection. What it says to the Left in France is, come up with a new policy, a new direction, and you will surprise everyone with the votes you're going to be able to get.

I want to turn next to the city of Seattle, which has been very important in the news in recent weeks and months. First of all, I want to remind everyone what's really interesting about Seattle. It is the home of six or seven huge American corporations, led by Amazon, Starbucks, Nordstrom, and Alaska Airlines. So it is a place with big corporate players. It's also a place with a remarkably strong, progressive local political culture. The city council, for example, over the disagreement of the mayor, passed remarkable bills in recent months governing housing. I want to mention them to you to give you an idea of what is happening when progressives are in a position to do something.

You cannot evict in Seattle during the school year — that is, you cannot evict school children, school teachers, people involved in education — because it is disruptive of something the community values: education. So if you're going to evict, you can't do it when it's going to disrupt the educational process. What an interesting idea. Number two: You cannot evict informally by letting a lease expire. Landlords have to offer a new lease when an old one expires. They cannot not do that. And number three: Even if the covid situation (let's call it) is over, people who didn't pay during covid will have time to work that out. You cannot evict them after covid for the rents they could not pay during.

In other words, the city council is intervening in the relationship between the tenants and the landlords, and changing that in favor of the tenants and not in favor of the landlords. They know what they're doing, they talked it out, they voted, and that's what they decided to do — to the great applause of the tenants, who are of course the vast majority, if not of the landlords, who are a minority.

But they've also been smart, and may go further and recognize that there's a difference between a big corporation that has lots of apartments and a mom-and-pop household, a small landlord. And they understand there's no need to pit these against each other, the tenants against the small landlords. If you want to be supportive of the small landlords, believe they have an important place in your community, like, for example, small businesses, then don't pit them against paying workers a decent wage or giving your tenant a decent apartment. You can tax wealthy people — for example, those big corporations I just listed — and have a fund that will help small landlords if and when they face a situation where people can't pay their rent, over a period of time to work it out, to provide some subsidy support so that small landlords are not damaged by doing something in the interest of the tenants.

Last point: There have been countries and cities that have solved this problem. Let me make a suggestion to those of you in Seattle. The city of Vienna has roughly half its housing either in publicly-owned and -operated housing or in a partnership between the city and private developers. Rents cannot go above 20, and in some cases 25, percent of a person's income. It is very common in the United States to go way beyond that. They don't permit that there. It's been successful for over a century. Learn from Vienna. That would be a way to solve this problem on a long-term basis that the city of Seattle could do well to pursue.

Last point: They're not doing that, the people who run Seattle, those big businesses. You know what they're working on? They're working to get rid of one of the most progressive leaders of that city council in Seattle — Kshama Sawant. There's a recall effort to deprive her of her seat on the council precisely because she has been one of the leaders that have made these kinds of progressive laws effective, powerful, and putting Seattle up as a model for other American cities to follow.

My next update has to do with understanding what inequality in wealth and income — that is so extreme in the United States — what some of its consequences are. We are an economy that is driven about 70 percent by consumer spending. In other words, the jobs we all have depend on the fact that about 70 percent of the demand for the goods and services our jobs produce comes from consumers. And a good bit of what remains of the economy's demand is called “derived demand.” That's a demand for machinery and buildings so that the consumer goods and services can be produced. In other words, the mass of consumers is what keeps the economy going on the demand side.

The more unequally you distribute wealth and income, the harder you make it for the vast majority of people to be effective consumers, to make the demand happen without which we don't have jobs. The more you concentrate wealth in the fewest hands imaginable — which is precisely what this country has done in the last 40 years — guess what. Those are very rich people. They save most of the money that gets saved in this society. They're already consuming more than they can probably handle. How many yachts do you need? How many homes do you have to have? Come on, we know. And what we're doing is we're cutting off the basis of the economy because we have concentrated so much wealth in the hands of people who don't spend it on goods and services, who save it, who play in the stock market with it, who move it abroad, and all the ways that do not help the American economy here.

That's a cost of inequality that we should understand. It also brings the government in. Because if the mass of the economy can't produce goods and services because the mass of their people don't have enough money to buy them, guess what. In desperation we call in the government to come and shore up the demand. That's what government deficits are there to do. The government spends more than it takes from us in taxes because it has to compensate for what the mass of people can't spend. That's why it was so important over the last year for the government to send checks to everybody to keep up the spending. That's not a result of covid; that's a result of inequality in our society. Because if you don't give money to the mass of people, their wages are no longer able to sustain the economy we need.

It is very, very costly for a society's economic system to be unequal. That's not something, oh good for the rich that they're rich, end of story. The rich, by being the concentrated holders of disproportionate amounts of wealth undercut the economy from the beginning. And it won't do to talk about gee, we should have more equality, or let's get our unions stronger, then they can push for high . . . . These are lovely proposals, but they don't go at the structure.

Capitalism is a system that has always generated growing inequality. The rich have the means to get richer, and the poor lack the means to escape from their poverty. That's the truth of this system — always has been — except for those short moments when you get a reversal of the story. We did that in the 1930s and ‘40s. We got — the poor in the middle did a bit better and the rich didn't. But the minute the war was over, the minute the exceptional situation was done, the business community came right in to reestablish the capitalism which generates the inequality that we have seen go crazy over the last half century.

We've come to the end of the first part of today's show. Before we move on, I want to thank all of you who have, and continue to support the work we do to make this show possible each week. And especially to our Patreon community, in this the 10th year of Economic Update that we're celebrating. If you haven't already, please go to patreon.com/economicupdate to learn more about how you can get involved in supporting this show. Please be sure to also follow us on Facebook, Twitter, and Instagram. And if you're watching this on YouTube, be sure to hit the SUBSCRIBE button below. Stay with us; we'll be right back.

Welcome back, friends, to the second half of today's Economic Update. I want to share with you and analyze the results of a poll taken here in the United States by Axios and the polling corporation Momentive. They took a poll in the middle of June 2021, so very recently, of 2,309 randomly chosen adults, an online poll. And it had to do with people's attitudes towards capitalism and socialism. Such polls have become more and more common in the last three or four years, particularly for one obvious reason: that the interest in socialism on the one hand, and the interest in capitalism on the other, have been changing. And it's very clear how: The interest, support for capitalism has been shrinking, and the interest, support for socialism has been rising. That, of course, is one of the reasons (and I wouldn't deny it) that I'm interested in understanding what's happening and why.

So let me review with you just some of the interesting results of this Axios and Momentive June 2021 poll. Among Republicans — that's individuals who self-identify as Republican voters — between 2019 and 2021 — that's roughly over the last two-plus years — the positive view of capitalism dropped among Republicans from 81 percent to 66 percent. That is a significant drop, and it's among Republicans.

Here is another question that Republicans answered in what I think is a remarkable way. In response to the question “Should the government reduce the wealth gap in the United States between the rich and the poor?”, the number of Republicans who said “Yes, the government should.” rose between 2019 and 2021 from 40 percent to 56 percent. A majority of Republicans support governmental intervention to reduce wealth inequality in the United States. Please keep that in mind every time you hear the leaders of the Republican Party act and speak as if nobody who's a Republican, and probably not most Democrats, would support such a thing. That would be a lie.

The next interesting result had to do with Americans in this polling group who were aged between 18 and 34. That's the youngest adults they interviewed. Between 2019 and 2021, “How do you react,” they were asked, “to capitalism? Would you say you are positively inclined toward capitalism?” — it fell from 58 percent in 2019 to 49 percent. A majority of young people, across the board politically, reacted negatively to capitalism. A majority did over those two years, that kind of a change.

And the last statistic I want to present to you, before offering a brief analysis, is this: “Socialism,” people were asked, “do you view it positively or negatively?” Among black Americans, African Americans, 60 percent viewed socialism positively. Among women, 45 percent viewed it positively. And this is the one that I admit shocked me: Among Republicans, 33 percent said that they viewed socialism positively.

Well, let me put that together with a fact or two. In recently held elections in the city of Buffalo, New York, in the Democratic Party primary — and that's the crucial election there. It's an overwhelmingly Democratic city, so whoever wins the primary within the Democratic Party is a virtual shoo-in for winning in the general election in November. A multi-term incumbent, gentleman, mayor was defeated by a first: A woman, African-American socialist won the election. She had been endorsed by the Working Families Party, which is a progressive party in the state of New York, and by the Democratic Socialists of America. She accepted and was happy about her identification as a socialist, and made no effort to hide it during the election. So one can infer that she did an amazing thing to unseat I believe it was a four-term incumbent Democratic mayor as a socialist woman, breaking barriers that we can all stop and think about.

It's more evidence of pretty much what that poll I discussed with you also showed. Here are some implications. First, think about how remarkable it is, here in the United States, after we have had an uninterrupted 75-year program of demonizing socialism, communism, Marxism — all of that. Everything on that left end of the spectrum was evil and awful. We were in a cold war for much of that time with the Soviet Union. They were everything bad; the opposite was everything good — all of that kind of simple-minded thinking. Despite all of that, how many changes have happened and how quickly.

American exceptionalism, which was once thought to include the idea that Americans will never be interested in socialism — we're too individualistic, we're to this, we’re too that — this is all disappearing. This is all dissolving. At first we all wondered, is this kind of an odd moment? But no. Bernie Sanders makes a certain sense. Occupy Wall Street makes a certain sense. These were steps along the way to a major shift in our politics and in our political consciousness. That's what all of these evidences show.

Now, of course, this is less a celebration of socialism than it is a rejection and critique of capitalism. Socialism is something Americans have very little knowledge, experience, connection to. That's been the result of the Cold War and its continuing legacy. But they do know all about capitalism because they live in it, and they deal with it in their work lives, in their consumer lives, in the rents they have to pay, in the education they have to fund — all of that. And they're not happy with what's happening to them, nor with most of the political leadership that keeps all of that going.

Ironically, what they're now thinking about are old notions of socialism, what socialism meant before the last 75 years. And you know why? Because all of the changes in socialism that have happened in the last 75 years have been basically ignored here in the United States. So extreme was the Cold War and the negation and demonization of everything socialist that nobody paid attention. But socialism was rocked in the last 75 years by the split between Russia and China, which changed everything, by the events in Hungary in 1956, by the transformation of the People's Republic of China over the last 30 years, by the Vietnam War, by a whole host of changes. But how socialism changed, Americans don't really know. What it all means. There's been no public discussion that most Americans have even heard of, let alone participated in.

And imagine what would happen to socialism if it weren't looked at in the old way, as the government coming in and doing things to help people, which is basically the idea. Suppose it were rethought to include a change in your daily work life — where you work, the enterprise you work in, that you're not a person who comes and is told what to do but you're part of the leadership, you're part of running this. The workplace is a community of which you are an equally powerful member with everybody else, rather than you're the employee and a tiny number of people are the employers telling you what to do.

If socialism meant that on top of what it already means, then the poll numbers I just went through with you would be modest compared to what we'd see then. Then socialism would have a positive meaning on top of capitalism having a negative one. And the fast-changing feelings of the American people would go further and faster. Think about it.

The last update for today that we'll have time for has to do with a column that appeared in The Washington Post June 12, 2021, written by Christine Emba. The Washington Post is owned by Jeffrey Bezos. And Jeffrey Bezos, as you know, is America's richest man, a billionaire, among the very, very richest people on this planet. And I'm going to come back to that in a minute.

Christine Emba's column — she's a regular columnist for The Washington Post, therefore an employee of Jeffrey Bezos — is to advocate banning billionaires. We should not have billionaires, says Christine. I find this extraordinary. First of all, let's give credit where it's due. On October 15th of 2019, during a Democratic Party presidential debate, that's right, Bernie Sanders advocated exactly that. So that's interesting. Two years ago we had this idea, and now it's resurfacing, only inside a billionaire's newspaper. What is going on here?

Well, let's ask ourselves a question. It's called in economics “opportunity cost.” Here's how opportunity cost works. You ask the question, what is the cost to us of having money not used for something? In other words, here's a bunch of money. It's being used for X. But the cost of using it for X could be understood as, what do we do without because we're not using it for Y? Two hundred billion dollars, roughly, is the personal wealth of Jeffrey Bezos, who owns The Washington Post. The fact that Jeffrey Bezos has those $200 billion — let's ask, what's the opportunity cost? What could the United States of America — everyone, including Jeffrey Bezos — have if he didn't have that money personally, but we had it available to do (fill in the blank).

Well, it occurred to me as I prepared this segment that you might not have in your mind what it means to have $200 billion, so let me explain. If you have that kind of money, you don't have the time or the knowledge to manage it properly. You're busy doing other things. Jeffrey Bezos, for example, is sitting in a position of power in Amazon Corporation, as you know, and he's also planning to send a rocket to the moon, and so forth. So he gives a hedge fund the $200 billion. Let's assume the hedge fund delivers five percent per year on that, with the investments they make. They promise more, by the way, so this is very modest. Well, five percent a year (I did the math; that's what we economists do) works out to (get ready) $200 million a week, every week, for 52 weeks a year. Let me make that clear: $200 million a week. That means every month, roughly, he gets another billion on top of his 200 billion. Because five weeks with 200 million a week, that gives you the billion. Are you with me? Okay.

This is enormous wealth that could be doing fantastic improvements to our society. But we don't get them because we allow billionaires. I want to end the show with that thought.

And thank you for paying attention and joining us here in our microphones and our cameras. And I look forward, as always, to speaking with you again next week.


Transcript by Marilou Baughman
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1.  Seattle’s new rent laws: 
2.  Consumer spending:
3. Support for socialism:
4.  Billionaires bad for society: 

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